Planning for Operations & Maintenance in Federal Energy Saving Performance Contracts

DRAFT OUTLINE 1187/22216/04

1Introduction and Overview

1.1Summary of Key Issues for Operation and Maintenance and Repair and Replacement in ESPCs

1.1.1List of key issues relating to O&M and R&R:

2Steps Involved in the Allocation and Management of Responsibility

2.1Step1: Allocation of Responsibility

2.2Step 2: Develop O&M Responsibility and Reporting Requirements in the Contract

2.2.1ESPC Contract Risk & Responsibility Matrix

2.2.2Other Contract Provisions

2.3Step 3: ESCo Develops project specific O&M checklists

2.4Step 4: ESCo Assembles O&M manuals & provides training to site staff

2.5Step 5: Government periodically reports on maintenance procedures performed

2.6Step 6: ESCo Submits Annual Report on project performance

3Reference Documents

1Introduction...... 2

1.1Summary of Key Issues for O&M in ESPCs...... 2

2Allocation of Responsibility...... 2

3Steps To Manage O&M Responsibilities...... 3

3.1Step 1: O&M Coverage in Contract Developed...... 3

3.1.1ESPC Contract Risk & Responsibility Matrix...... 4

3.1.2Other Contract Provisions...... 5

3.2Step 2: ESCo Develops project specific O&M checklists...... 6

3.3Step 3: ESCo Assembles O&M manuals & provides training to site staff.....6

3.4Step 4: Government periodically reports on maintenance procedures performed 7

3.5Step 5: ESCo Submits Annual Report on project performance...... 7

4Reference Documents...... 8

FEMP O&M Best Practices Guide...... 8

1Introduction...... 2

1.1Summary of Key Issues for O&M in ESPCs...... 2

1.2Other Issues - Not Covered Here...... 2

2Allocation of Responsibility...... 2

3Steps To Manage O&M Responsibilities...... 3

3.1Step 1: O&M Coverage in Risk Matrix & Contract Developed...... 3

3.1.1ESPC Contract Risk & Responsibility Matrix...... 3

3.1.2Contract Provisions...... 5

3.2Step 2: ESCo Develops project specific O&M checklists...... 5

3.3Step 3: ESCo Assembles O&M manuals & provides training to site staff.....5

3.4Step 4: Agency periodically reports on maintenance procedures performed...5

3.5Step 5: ESCo Submits Annual Report on project performance...... 5

4Reference Documents...... 6

FEMP O&M Best Practices Guide...... 6

What other resources?...... 6

1Introduction and Overview

Effective O&M is one of the most cost-effective methods for ensuring reliability, safety, and energy efficiency. Inadequate maintenance of energy-using systems is a major cause of energy waste in both the federal government and the private sector. Good maintenance practices can generate substantial energy savings and should be considered a resource. Moreover, improvements to facility maintenance programs can often be accomplished immediately and at a relatively low cost.

According to US Department of Energy’s O&M Best Practices Document (DOE, 2004), Operations and Maintenance are the decisions and actions regarding the control and upkeep of property and equipment. These are inclusive, but not limited to, the following:

  • Actions focused on scheduling, procedures, and work/systems control and optimization;
  • Performance of routine, preventive, predictive, scheduled and unscheduled actions aimed at preventing equipment failure or decline with the goal of increasing efficiency, reliability, and safety.

In the context of the Federal Energy Savings Performance Contracts, O&M is critical to maintaining the performance of the installed equipment and to achieving the projected energy savings for the term of the ESPC. In cases where poor O&M is blamed for a shortfall in energy savings, the situation is complicated by the fact that delineation of O&M responsibility for equipment that affects the performance of installed ECMs is not adequately addressed in the contract documents.

The purpose of this document is to provide guidance on allocating O&M and repair and replacement (R&R) responsibilities during ESPC project development and putting in place O&M reporting requirements that would minimize disagreements between federal agencies and ESCOs over O&M and R&R and help ensure savings persistence during performance period. Verification of cost savings from the O&M changes resulting from ESPCs is not within the scope of this document. Goals, purpose of document

Recommend procedures for documentation and reporting of post- installation GovernmentGovernment and ESCO Operations, Maintenance, Repair & Replacement Activities conducted during the project’s performance period

Not Covered Here: Verification of cost savings resulting from O&M changes

How this guidance fits with other ESPC documents: The document is being developed to provide guidance on allocating responsibilities and instituting proper O&M procedures in all ESPCs. In cases, where specific examples are necessary, this document references O&M sections of FEMP contractual and reporting documents although the concepts are applicable in other Federal ESPC programs.

Super ESPC IDIQ; Site specific DO RFPs; M&V Plan & Savings Calculations Outline; Annual Report Outline

1.1Summary of Key Issues for Operation and Maintenanceand Repair and Replacement in ESPCs

With increasing attention paid to the actual energy and cost savings generated, the ESPCs are requiring unambiguous allocation of O&M and R&R responsibility and specifying reporting requirements for the party responsible for performing these actions. In the specific instance of Federal Energy Management Program’s Super ESPCs, O&M is discussed in the following documents:

  • Super ESPC IDIQ document
  • Risk and Responsibility Matrix
  • M&V Plan Outline
  • Annual Report Outline
  • Post-installation Report Outline

Discuss or highlight key issues from document

1.1.1List of key issues relating to O&M and R&R:

Operation of ECMs (C.6.1 trough C.6.5 of IDIQ in DOE ESPC)

  • Define what constitutes Operation of ECMs (Section C.6.1 of IDIQ)
  • Describe overall responsibility for the Operation of ECMs and circumstances when exceptions can be made (Section 3.b of Risk/Responsibility Matrix, Section C.6.2 of IDIQ)
  • ESCO will develop a new written Operation work procedure (Operations manual) for approval by Government (Section C.6.3 of IDIQ)
  • List conditions under which the government will assume proposed operations of ECMs and under which it can move, turn off, or otherwise change any Contractor-owned equipment.

Maintenance of ECMs (C.7.1 through C.7.5 of IDIQ)

  • Define what constitutes (preventive) Maintenance of ECMs (Section C.7.1 of IDIQ)
  • Describe overall responsibility for the Maintenance of ECMs and circumstances when exceptions can be made (Section 3.c of Risk/Responsibility Matrix, Section C.6.2 of IDIQ)
  • ESCO will develop a new written Maintenance work procedure (Maintenance manual) for approval by Government (Section C.6.3 of IDIQ)
  • List conditions under which the government will assume maintenance of ECMs and under which it can move, turn off, or otherwise change any Contractor-owned equipment.

Repair and Replacement of Equipment Installed by ESCOs (C.8.1 trough C.8.5 of IDIQ)

  • Define conditions which will warrant repair and replacement of installed equipment (Section C.7.1 of IDIQ)
  • Describe overall responsibility for the Maintenance of ECMs and circumstances when exceptions can be made (Section 3.d of Risk/Responsibility Matrix, Section C.6.2 of IDIQ). Specifically, discuss replacement responsibility when equipment life is shorter than the term of the contract.
  • List different conditions under which R&R work will be performed, who will be liable, and the source of funds for performing R&R activities.

Distribution of responsibilitresponsibilitiesy for ongoing project performance

O&M Iimpact of operations on savings

Impact of preventative maintenance on savings

Planning for Eequipment repair & replacement

Life of equipment vs. project length – need for planned replacement

ESCO responsible for equipment performance even when GFeds doovernment does O&Moperations & maintenance

How to address key issues are addressed – Risk matrix; Super ESPC IDIQ provisions; requirements from other contracts

2Other Issues - Not Covered Here

Verification of savings from O&M changes

32Steps Involved in the Allocation and Management of Responsibility

2.1Step1: Allocation of Responsibility

Possible allocation of operations and maintenance responsibilities includes:

ESCO performs all required operations & maintenance activities; or

Government executes detailed operating procedures defined by the ESCO,

Government executes detailed maintenance procedures defined by the ESCO,

Government tracks and reports O&M activities to ESCO per agreed upon project specific requirements

Although oOperations mMaintenance activities are either performed by the ESCo or conducted by the AgencyGovernment (or their representative), the ESCO is responsible for performance of new equipment for the duration of the ESPC contract , while the agencyGovernment maintains responsibility for existing equipment.

Verify and make note of if differences in ESPC contracts

For example, the ESCO may take responsibility for performing operations and preventative maintenance (PM) on a new chiller installed by the ESCO, but the Government maintains all O&M responsibilities for other existing chiller plant equipment such as pumps and cooling towers.

The ESCO must take over O&M if Government performance of Operations & Maintenance threatens realization of saving ?ask Joyce; verify if differences in ESPC contracts.

Specific example: Reference FEMP's modified IDIQ section where allocation of responsibility is discussed. Also reference R/R Matrix section where O&M and R&R responsibility is discussed.

For example, the Government may take responsibility for performing operations and preventative maintenance (PM) on a chiller installed by the ESCO, but the ESCO maintains responsibility for the cost saving guarantee from the project.

If the working performance of the new chiller is not sustained under PM by the Government and threatens to compromise the realization of the cost savings guarantee, then the ESCO has the right to take over these responsibilities from the Government.

If the Government does not operate the chiller as specified and impacts the realization of savings, the ESCO will often inform the Government of their divergence from agreed upon actions and the resulting impact on realizing cost savings, but will not assume operation of the chiller.

ESCO may:OMDefine detailed O&M procedures and reporting requirements to be executed by Agency

ESCO must take over O&M if agency performance of O&M threatens realization of saving

Government performs negotiated operations & maintenance activities; and

Tracks & reports completed activities to ESCO

3.1Steps To Manage O&M Responsibilities

The stages in managing O&M responsibilities within ana Federal ESPC project are summarized in the following 54 steps:

Step 1: ESCo and Government Aagree upon O&M related responsibilities outlined in the Risk & Responsibility Matrix and detail responsibilities in appropriate sections of contract;

Step 2:ESCo develops project specific O&M checklists

Step 3:ESCo assembles O&M Manuals & provides training

Step 4:AgencyGovernment maintains maintenance records, provides periodic reporting on maintenance procedures performed

Step 5: ESCo Submits Annual Report on project performance

3.22.2Step 21: Develop O&M Coverage Responsibility and Reporting Requirements in Risk Matrix &the Contractt Developed

ESCO and Government must first Aagree upon O&M related responsibilities outlined in the Risk & Responsibility Matrix;

Provide Ddetails ofagreed upon responsibilities in appropriate sections of contract (often found in the M&V Plan or other section of the contract where allocation of responsibility is being dicussed.)

3.2.12.2.1ESPC Contract Risk & Responsibility Matrix

FEMP’s “Risk & Responsibility Matrix”details risks and responsibilities that should be considered when developing performance contracts, especially the verification requirements of these performance contracts. This matrix was developed to help identify the important project risks, assess their potential impact, and clarify the party responsible for managing the risk. These risks fall into three primary categories: Financial, Operational, and Performance, as shown Table 1Table 1Table 1.

Key item related to O&M in the Risk & Responsibility Matrix occur in Section 3: Performance, and include:

Equipment Performance

Operations

Maintenance

Equipment Repair & Replacement

The text of these related sections (from IDIQ revision dated July 12th, 2004) is included in Table 3.

Table 1: Categories Covered in the Risk & Responsibility Matrix

1. Financial / 2. Operational / 3. Performance
a. Interest Rates / a. Operating Hours / a. Equipment Performance
b. Energy Prices / b. Load / b. Operations
c. Construction Costs / c. Weather / c. Maintenance & Repair
d. M&V Costs / d. User Participation / d. Equipment Replacement
e. Delays
f. Major Changes to Facility

The risk and responsibility matrix is part of the Super ESPC IDIQ contract and the FEMP M&V Guidelines V 2.2, and is available electronically from For more information on an the application of this tool, see an article from the November 2001 FEMP Focus, entitled “Fine-Tuning for Best-Value Super ESPCs Using the Risk/Responsibility Matrix,” whichis available at eere.energy.gov/femp/financing/superespcs_espcbasics2.cfm.

Key item related to O&M in the Risk & Responsibility Matrix occurs in Section 3: Performance, and include:

Equipment Performance

Operations

Maintenance

Equipment Repair & Replacement

The text of these related sections (from IDIQ revision dated July 12th, 2004) is included in Table 2Table 2. (Question: Should we excerpt relevant section from referenced document or just reference the section?)

Table 223: Excerpt from Risk & Responsibility Matrix

  1. Performance:

  1. Equipment performance: Generally the Contractor has control over the selection of equipment and is responsible for its proper installation, commissioning, and performance. Generally the Contractor has responsibility to demonstrate that the new improvements meet expected performance levels including specified equipment capacity, standards of service, and efficiency. Clarify who is responsible for initial and long-term performance, how it will be verified, and what will be done if performance does not meet expectations.

  1. Operations: Responsibility for operations is negotiable, and it can impact performance. Clarify responsibility for operations, the implication of equipment control, how changes in operating procedures will be handled, and how proper operations will be assured.

  1. Maintenance: Responsibility for maintenance is negotiable, and it can impact performance. Clarify how long-term preventative maintenance will be assured, especially if the party responsible for long-term performance is not responsible for maintenance (e.g. Contractor provides maintenance checklist and reporting frequency). Clarify who is responsible for long-term preventative maintenance to maintain operational performance throughout the contract term.

  1. Equipment Repair and Replacement: Responsibility for repair and replacement of contractor-installed equipment is negotiable, however it is often tied to projectto project performance. Clarify who is responsible for replacement of failed components or equipment throughout the term of the contract. Specifically address potential impacts on performance due to equipment failure. Specify expected equipment life and warranties for all installed equipment. Discuss replacement responsibility when equipment life is shorter than the term of the contract. Clarify what will be done if inadequate repair or replacement impact performance.

3.2.22.2.2Other Contract Provisions

The Risk & Responsibility Matrix captures an overview of the strategies agreed-upon by the AgencyGovernment and ESCo of how risks associated with the project will be allocated. HOWEVER, the allocation of risk actually occurs within the details of the contract. Many of these provisions are defined within the M&V plans (IDIQ?) for individual energy conservation measures (ECMs). Ensuring that all related items are appropriately defined requires careful contract development and review.

The standard M&V Plan outlines calls for the detailed information to be provided on the overall project as well as for each EMC, as shown in Table 3Table 3.

Table 3: Excerpt from M&V Plan & Savings Calculations Outline[1]

From Whole Project Data / Global Assumptions
2.4 O&M Reporting Requirements
2.4.1 Define Government and ESCO Reporting Requirements:
  • Summarize key verification activities and reporting responsibilities of government and ESCO on operations, preventive maintenance, repair, and replacement items from details in ECM specific M&V Plans.
  • Define content of reports and reporting schedule.Summarize key verification activities and reporting responsibilities of government and ESCO on operations and maintenance items from details in ECM specific M&V Plans.

From ECM Specific M&V Plan
Reference parts of contract where the following O&M related verification and reporting responsibility is covered
Detail verification activities and reporting responsibilities of government and ESCO on operations and maintenance items.
  • State organization(s) responsible for equipment operations. If appropriate, detail how responsibilities are shared or reference where this information is located.
  • State organization(s) responsible for performing maintenance. If appropriate, detail how responsibilities are shared or reference where this information is located.
  • State organization(s) responsible for performing equipment repair. If appropriate, detail how responsibilities are shared or reference where this information is located.

The content provided in the M&V plan outline is intended to help facilitate defining the details related to O&M for each project & ECM, including:Ensuring that all related items are appropriately defined requires careful contract development and review.

Provisions for ESCO must to monitor Government performance of O&M

Specific O&M record keeping / reporting requirements by government

Procedures for ESCO review / verification of O&M records

Define criteria for ESCO to take over operationsO&M

Define criteria for ESCO to take over maintenance (Prior to equipment failure)

How does ESCO get paid for performing Government’s replacement or maintenance activities?

3.32.3Step 32: ESCo Develops project specific O&M checklists

Discuss requirements of contracts: although checklists are not specifically required, best practice in tracking distributed responsibilities

Discuss reference documents available;

Point to example checklist(s) – SeeReference DOE’s O&M Best Practices, DOE pub # & www ? Document.

3.42.4Step 43: ESCo Assembles O&M manuals & provides training to site staff

O&M Manuals adequate for government records (DOE 2004, ASHRAE 1993)– see guidance where?

Site staff trained on equipment & procedures

3.52.5Step 54: AgencyGovernment periodically reports on maintenance procedures performed

O&M records to kept by government– define for each project

Reporting frequency for O&M activities – define for each project.; isn’t this item separate from Annual Report? Should it be added to M&V Plan outline?

3.62.6Step 65: ESCo Submits Annual Report on project performance

PeriodicDefine reporting requirements are defined in M&V Plan; Reference The executive summary relevant sections of the MV Plan Outline contains a section (#2.3) which allows for the defining the project specific

performance period reporting activities. For each project, the contents and frequency of the reporting is defined.

Reference provisions in Annual Report Outline

Minimum of annual reporting required;

Actual reporting frequency for M&V and O&M activities – define for each project

Provisions related to O&M in Annual Report Outline (in the case of FEMP ESPC contract) are detailed in Table 4Table 4.

Table 4: Excerpts from Annual Report Outline[2]

1. Executive Summary
1.5 Performance and O&M Issues
Note impact of operating deficiencies or enhancements on generation of savings
Note impact of maintenance deficiencies on generation of savings
Detail any deficiencies needed to be addressed by ESCO or GovernmentSummary of operations and maintenance (O&M) activities
2.5 O&M and Other Activities3. Details for each ECM
2.5.1Operating requirements:
State organization(s) responsible for equipment operations. If appropriate, detail how responsibilities are shared.
Summarize key operating procedures and any related verification activities.
Detail any deficiencies needed to be addressed by ESCO or Government
Note impact of operating deficiencies or enhancements on generation of savings3.6 O&M activities
2.5.2Preventive maintenance requirements:
State organization(s) responsible for performing maintenance. If appropriate, detail how responsibilities are shared.
Verification of scheduled maintenance items completed by ESCO or Government
Detail any deficiencies needed to be addressed by ESCO or Government
Note impact of maintenance deficiencies on generation of savings3.6.1 Operating requirements:
2.5.3Repair & replacement requirements:
State organization(s) responsible for repair and replacement. If appropriate, detail how responsibilities are shared.
Summary of activities conducted this period by ESCO or Government
Detail any deficiencies needed to be addressed by ESCO or Government
Note impact of equipment deficiencies on generation of savings3.6.1.1 State organization(s) responsible for equipment operations. If appropriate, detail how responsibilities are shared.

43Reference Documents

  • Insert or reference FEMP Sample Equipment Checklists from O&M Best Practices Guide (
  • FEMP O&M Best Practices Guide ()
  • ASHRAE Guideline 4: Preparation of Operating and Maintenance Documentation for Building Systems. Atlanta, GA: ASHRAE, 1993.

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